Prevailing FLSA defendant may be entitled to award of costs
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Monday, June 6, 2016

Prevailing FLSA defendant may be entitled to award of costs

By Kathleen Kapusta, J.D. Observing that FLSA Sec. 216(b) addresses only an award of costs to a prevailing plaintiff and neither that provision, nor any other provision of the FLSA, precludes an award of costs to a prevailing defendant, the Eighth Circuit found that an employer, as the prevailing party, was not precluded from collecting its costs incurred in defending a lawsuit alleging it misclassified employees as exempt. Vacating the decision of the court below, the appeals court found the employer was entitled to a decision whether its bill of costs should be awarded under Rule 54(d)(1) without consideration of the FLSA’s silence on the issue of prevailing defendants (Lochridge v. Lindsey Management Co., Inc., June 2, 2016, Bough, S.). Employer prevails. After four employees filed a collective action against the employer alleging violations of the FLSA, the district court conditionally certified a salaried class and an hourly class. The salaried class was later decertified. Although the hourly class settled all claims against the company, the decertified salaried class members continued to pursue their claims, including the eight employees who brought the instant action against the employer. Their claims went to a jury, which returned a verdict in favor of the company. Bill of costs denied. The employer then filed its bill of costs pursuant to Federal Rule of Civil Procedure 54(d), seeking reimbursement of more than $22,000 in costs. Finding that the FLSA is remedial in nature and did not indicate that defendants should recover costs, the district court denied the bill of costs. On appeal, the employer argued that the district court abused its discretion by denying its bill of costs while failing to articulate appropriate grounds sufficient to overcome the presumption in favor of awarding costs to the prevailing party. Rule 54(d)(1) provides, in relevant part, that “Unless a federal statute, these rules, or a court order provides otherwise, costs—other than attorney’s fees—should be allowed to the prevailing party,” the appeals court pointed out, explaining that even if a federal statute does not specifically authorize recovery of costs in a particular case, Rule 54(d)(1) independently authorizes district courts to award costs to prevailing parties unless a statute or rule precludes it. Statutory silence. While FLSA Sec. 216(b) addresses an award of costs to a prevailing plaintiff, it is silent as to prevailing defendants. In Marx v. Gen. Revenue Corp., however, the Supreme Court addressed the issue of statutory silence. Faced with the question whether Section 1692k(a)(3) of the Fair Debt Collection Practices Act “provided otherwise” than Rule 54(d)(1), the court reasoned that “[b]ecause the Rule [54(d)(1)] grants district courts discretion to award costs, a statute is contrary to the Rule if it limits that discretion.” According to the Supreme Court, “silence does not displace the background rule that a court has discretion to award costs.” Thus, finding nothing contrary to Rule 54(d) in the FLSA, the court here held that the employer was not precluded from collecting its costs. “The fact that a prevailing party prosecutes its rights under the Federal Rules of Civil Procedure to an award of costs cannot be seen as chilling the flow of litigation,” said the court, noting that “the very possibility that a losing party will be required to reimburse the prevailing party for its costs should cause parties to litigation to pause and calculate the risks of pursuing meritless or marginal claims.” Pointing out that Rule 54(d)(1) provides that costs should be awarded to the prevailing party, the court cautioned that the word “should” makes clear that the decision whether to award costs ultimately lies within the sound discretion of the district court. Accordingly, it remanded the case to the court below for further consideration.

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